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Interesting little fact: Effective 1/1/2005, the Turkish Lria (TRL) has been replaced by the New Turkish Lira (YTL). So on Dec 31, 1,000,000 (1 million) Turkish lira was $0.74 US Dollars (74 cents), but the next day the new standard currency was such that 1 Lira was $0.74. but the old Lira are being accepted for one year at the 1,000,000/1 rate.
The Euro transition seemed to go rather well, so maybe this isn't a big deal, but it sounds like it might be a bit chaotic.
If you have any old Lira floating around in your pocket, you might want to get those exchanged.
With a dollar not going as far as it used to (according to my parents at least) , I wonder what would happen if The US revalued. Say we revalued so a dime was worth a dollar, so to speak. Movies would be roughly 10 cents again, cars would cost $2000, houses would be $15,000. Would it affect people's spenmding habits? What would the effect be on the world economy?
Posts: 4 | Registered: Jan 2005
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It makes sense. I've often wondered at how difficult math must be in places with such obscenely devalued currencies as to require petty purchases in the millions.
Posts: 8504 | Registered: Aug 1999
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I remember when my family visited Warsaw about a decade ago. My allowance was in the thousands. I didn't mind. Posts: 2149 | Registered: Aug 2000
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This just goes to show why economics is too damn complicated. So the Turkish government is telling people to trade in their old slips of paper for some new slips of paper, and pretend that the new slips of paper are more valuable. Since no money in the world has value until two or more people agree to treat it like it does--and that even includes things like gold coins--why not just pretend that the old slips of paper had more value? Wouldn't that be more efficient? Posts: 1814 | Registered: Jul 2004
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And you're wrong about the value of money. In this case, we are talking about a fiat currency -- the money has value because the government says the money has value.
The value of the old currency is set by the markets (which reflect what people are willing to consider the currency valued in terms of goods and other currencies, as moderated by an understanding of the country's current state), which may be influenced by the country itself quite effectively, though always at a cost.
The value of the old currency cannot readily be changed -- if you try to make it worth more, suddenly people have more money, which creates rampant inflation as everyone increases the value of goods to match . . . which results in the currency not actually being worth any more (and currency traders would just discount the currency based on the inflation).
The value of the new currency is currently being pegged to the value of the old currency by a simple measure -- the government will give you new currency for old currency at a certain rate. There is no incentive to offer the new currency at a worse rate, and offering it at a better rate isn't feasible as the only way the new currency may readily be acquired is through the exchange at the government's rate (plus the government would likely put the kibosh on that right quick).
Why will people switch? Because the old currency, when it loses its fiat status, will become less valuable. It will no longer be backed by the government, so unless it has some intrinsic value it will have very little value (particularly as a readily available substitute currency exists; currency does have value as a pure medium of exchange, but a government-backed medium of exchange is a heck of a lot more secure).
Why would the government do this? There are a number of reasons, but the simplest is that people don't like things to cost large numbers. Which sounds better, a cup of coffee costs 2 billion zugs, or a cup of coffee costs a zug and a half? Also, there is a very real benefit to ditching all those zeros: with a lot of zeros, a single zero is much easier to misplace, introducing accounting errors.
Posts: 15770 | Registered: Dec 2001
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, I wonder what would happen if The US revalued. Say we revalued so a dime was worth a dollar, so to speak. Movies would be roughly 10 cents again, cars would cost $2000, houses would be $15,000. Would it affect people's spenmding habits? What would the effect be on the world economy?
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